Wednesday, December 03, 2008

Duke filing against insurer comments & my responses

On the thread of Duke filing against insurer in connection with lax suits are comments I mainly want to bring to you attention and thank the commenters.

Reader comments are in italics; my responses in plain

Ex-prosecutor said...

There is one aspect of this latest lawsuit which should be very interesting to those of us following this unfolding situation.

In the civil rights suit brought by the players against various defendants, the defense lawyers, as I recall, were successful in getting a ruling that discovery (depositions, production of most documents, etc.) will be postponed until the judge rules on the defendants' summary judgment motions.

The judge will decide which, if any of the plaintiffs' claims do not make out a legal basis upon which recovery can be based. If some of the claims are dismissed as a matter of law, depositions and discovery of documents will be limited to the surviving claims and defendants.

The civil rights suits are breathtaking in their complexity and length, so it may take and judge and his law clerks awhile to make a ruling.

However, as to Duke's claims against its insurance carrier, one of the company's main defenses, I expect, will be that the misdeeds of Duke officials triggered an exclusion to the policy, so it does not cover Duke.

What makes this defense interesting is that to determine exactly what the Duke officials did, the insurance company should be able to depose the Duke officials and employees and obtain copies of relevant documents. Ultimately, copies of some depositions may be filed with the court clerk, meaning that they will be available for public review.

It's likely that a copy of the policy is attached as an exhibit to Duke's lawsuit. An examination of it would show what acts are excluded from coverage.

I’ve nothing to say to Ex-prosecutor except “thank you.”

Jim in San Diego said...

This is an intriguing development in the Lacrosse case.

Jurisdictions of which I have knowledge prohibit insurers from covering or defending against claims for intentional wrongs.

This prohibition if for obvious policy reasons. If you could insure in advance for committing an intentional wrong, you could "buy" the right to do a wrong. (This was done in Medieval times through purchase from the Church of advance dispensations for sins the purchaser intended to commit. It is frowned upon here.)

The insurer would not have lightly refused to pay defense costs in a case like this. Thus, they must have a reason, and a good reason.

Discovery in the insurance case, which will begin very soon, will be fascinating.

“Thank you” to Jim, too. And welcome back. It’s good to have you commenting again.

Steve in New Mexico said - - -

You two guys offer articulate, literate, informative and yes Jim, fascinating comments. Thank you from a regular reader for the time and effort you take to make them.

Yes, they do, Steve. And so do you and many other JinC commenters who add to the blog.

Anonymous @ 9:51 - - -

John - I love your work, but you have some factual errors in your write-up.

The "McFadyen et al lawsuit" (3 plaintiffs) is being managed by the attorney R. Ekstrand.

The "Carrington et al lawsuit" (38 plaintiffs) is being managed by the attorney C. Cooper.

Keep up the good work.

Anon was right. I made the corrections and put a readers note at the head of post in which I noted a correction had been made, referenced Anon’s comment on the thread and thanked Anon.

I also added this comment to the thread - - -

To Anon @ 9:51,

Thanks for combining a very helpful piece of editing with some nice words for me.

I appreciate your help to me and others who'll read the post.



I’ll wrap with this:

Since both Duke and National Union surely went a long way to avoid the suit Duke’s brought, the cause(s) and degree(s) of difference(s) between the two must be huge, vital and viewed by both as irresolvable so that in Duke’s case, it brought a federal suit against National Union, and, in NU’s case, it's chosen to face a suit in federal court rather then accede to Duke’s indemnity requests.


drew said...

John - work in the occasionally-reviled insurance industry, and have followed your comments as well as KC's for a few days now about the DJ action Duke is seeking about their policies.

I should point out that I am not an expert in university or not-for-profit insurance. As a result, I am largely unfamiliar with what Duke has characterized as an "I&O" policy. Nonetheless, the manner in which they describe the policy sounds very similar to a Directors + Officers Liability policy, with which I have more than passing experience.

These policies do indeed cover "wrongful acts", and do describe what those wrongful acts are. However, Duke's lawsuit seems to drive too hard on only one small portion of the insuring agreement (i.e., the "wrongful act[s]"), without making any reference to the many exclusions that no doubt are also a large portion of the policy.

I suspect that we could all agree that some wrongful acts occurred in Durham in 2006. The fundamental question, however, is whether or not they fall within the insuring agreement in the policy (the fact that it was not appended to Duke's filing suggests to me that their counsel would not like to have the full policy subject to review), AND are not excluded by the policy's other provisions.

In insurance claims work, the process is usually rather simple - you determine whether an occurrence took place (was there a loss?); whether it falls within the insuring agreement (is it potentially covered by the policy?) and then whether or not the loss/occurrence is excluded by the policy. All the definitions, conditions, endorsements, etc. that are attached to most policies are there to provide some contractual insight into how to address the three questions above.

My suspicion is that National Union (who are not a bunch of rubes who just fell off the turnip truck in matters such as this) was compelled to acknowledge Duke's initial notice of the case; thus, the letter advising that the events were "potentially" covered. But they also "reserved rights", which is a nice way of saying that they didn't think there was going to be coverage in the claim, and would continue to investigate the second and third of the questions above. That investigation is not yet complete; however, Duke has always had the opportunity to "go it alone" (as they appear to have done) with the proviso that they could force National Union to cover 100% of the claim (subject to some conditions regarding the policy's limit of liability) in the event that Duke is/was successful in arguing that the claim is in fact a covered event.

Personally, my opinion has long been that the retention of Jamie Gorelick as counsel for Duke in the underlying claims is the tip-off that Duke has parted ways with its insurers. Ms. Gorelick is not the type of lawyer that competent insurers like National Union would retain to defend its insured; National Union would insist on counsel who is familiar with the insurance specialty, and is an accomplished litigator. Ms. Gorelick and her firm are lightweights in the type of litigation involved in the underlying legal actions, and (my opinion here) was likely selected for their political and lobbying connections. There are plenty of other lawyers without such name recognition and/or Washington insider status that have far better track records in actually defending these types of claims successfully. National Union would likely have insisted on such a firm to defend itself (as the indemnitor of Duke), rather than go with the PR-type firm.

The ultimate resolution of this matter will likely not take place very publicly, as National Union's reply brief will likely start to lay out "minor" things such as the applicable exclusions from the policy, and their reading of the action(s) taken by Duke and DUMC based on the presumed extensive cooperation National Union has had under the terms of the policy. If, in fact, Duke provided National Union with the cooperation that I fully suspect that NU demanded, it would certainly be out of character vis-a-vis Duke's other comments in this matter.

Duke's case in general is some measure of proof that their counsel are not familiar litigators in this type of matter, and that the University seems to be relying on its reputation and brand name to insulate it from any adverse outcome. I'm sorry to say that I believe this is one instance where Duke will not be able to BS their way through the legal system, nor can they rely on their reputational capital to get them off.

Anonymous said...


We have Duke, an insurance company and dozens of $400/hr lawyers all whompin' each other up the side of their heads.

It doesn't get any better than this.


Anonymous said...

I always felt that there would come a time, when Duke and Durham least expected it, when the proverbial *!@% would hit the fan. It looks like that moment is about to occur. It has been my experience (albeit limited) that insurance companies have no desire to pay out monies - and if there is any way that can avoid doing so they will. It looks as if dumb and dumber are about to be hoisted on a petard of their own making - in order to get the insurers to pay, they are going to have to engage in the very depositions that they have been so studiously trying to avoid in the civil cases. This should be interesting.

Anonymous said...

Yep, looks like it's getting time to strap in, folks, as the ride is going to get a bit "bumpy," for Duke, anyway. This is a fantastic development, just, literally, fantastic. Serious insurance companies--like Nat'l Union--are like Duke faculty members sipping from the PC trough. No, insurance claims adjusters and, more importantly, their seasoned--albeit largely anonymous (unlike Gorelick)--attorneys carefully toil away with the sole purpose of denying bogus insured claims, such as what Duke has likely advanced. These folks deal with facts, the truth, and fiscal reality--rather than G88 blather. Seriously, with this filing things just got a whole lot interesting.

Anonymous said...

Gorelick is, indeed, a lightweight. I've seen her up close and personal when she was with the Defense Department and she never failed to show anything but her arrogance and ignorance. She'll always be able to scam another elitist and get a cushy job somewhere in the government, but her brief forays into the real world show her, warts and all. And unfortunately for Jamie, her warts appear to be her most prominent feature.
When I saw that Duke had retained her, I concluded they were in deep doo-doo.
Tarheel Hawkeye

Anonymous said...

Duke stated in its filing that it notified the insurance company on March 30, 2006. This date becomes very relevant. The lacrosse players' attorneys in the civil suits will have a strong argument that this was the date that Duke first believed that it could face future litigation from its actions. As such, Duke would have been required to preserve all related documents ( letters, e-mails etc.) as of March 30,2006 and going forward.


Anonymous said...

There was a meeting on March 29, 2006 which was attended by senior members of DUPD ( Dean and Graves ) and a number of Durham officials including city manager Baker, police chief Chalmers, deputy chief Hodge, Gottlieb , Himan and an attorney from DPD. This was not, I believe, merely a case status meeting, as has been reported based on responses from Durham officials and John Burness , who did not even attend. This many senior officials and an attorney typically would not attend a routine meeting. I believe that there were several important issues discussed at that meeting which involved Duke's cooperation with and/or tacit approval of some very questionable and/or illegal activities, namely

1) Request for the players' key card information for March 13 and 14, 2006. This was provided, in violation of FERPA, by DUPD to DPD on 3/31/06. Two months later Duke officials conspired with Durham authorities in an elaborate cover up scheme involving the issuance of fraudulent subpoenas.

2)Players' DNA testing results from the SBI lab, which Durham authorities ( Nifong/police) knew were negative as early as 3/28/06.

3) The Ryan M. e-mail which somebody( very likely from Duke ) sent to DUPD anonymously on 3/27/06 and which was released publicly on 4/5/06 . This precipitated the canceling of the season and firing of the coach and prejudiced the case against the lacrosse players, particularly in the court of public opinion. Other related e-mails to which both Duke and DPD had access provided strong evidence that the alleged crimes did not occur --- these e-mails were not publicly released.

4) The unlawful photo ID lineup which was conducted on April 4 where Crystal was shown only photos of lacrosse players.

This was not, in my opinion, a status meeting. This was a meeting to solicit Duke's cooperation in the prosecution ( persecution ) of the lacrosse players.



drew said...

Anon@12:05pm - Thanks for reminding me about the keycard data issue. I had neglected that earlier. This was clearly an act by Duke personnel (almost assuredly with senior management approval) that was clearly in violation of the FERPA act. In other words, an illegal act condoned/committed by Duke, the insured in the soon-to-be famous I&O policy issued by National Union.

Insurance protection against illegal acts is against public policy in virtually every jurisdiction in the country; thus, National Union already has the means to invoke that exclusion in their policy.

Based on the dates of the events (if what we read is correct), the filing of Duke's notice of a potential occurrence (bear in mind that they [Duke] did not yet have a claim made against them) following the illegal act would likely negate coverage altogether, since National Union could argue (probably rather easily) that Duke's notice was made in bad faith, since they knew their own personnel had already broken the federal law. It shouldn't be too difficult to get one of the lower-echelon employees that Duke will try to throw under the bus to testify that Duke's senior management was aware of the keycard matter at the time they filed with National Union.

Don't put your money on Duke in the ensuing litigation with National Union. AIG's claims people are too smart and experienced to allow their own underlings to deny payment in a claim that could be potentially such a large PR issue. My suspicion is that National Union has very good policy language, law, and facts on their side.

It will be fun to watch.